Railway Reform: Toolkit for Improving Rail Sector Performance - ppiaf

Railway Reform: Toolkit for Improving Rail Sector Performance
Annex 4: Concession Contract Guide
Authority, actually or contingently. In economic terms, this may mean that the
Authority will assume some construction and operation risk through required
payments to the Funders, without the Authority receiving a compensatory
amount from any other source, particularly when facilities are not operating
properly. The Authority should avoid to the fullest extent practicable becoming a
direct party to any finance commitments with Funders, other than under the inter-creditor
agreement between various Funders and the Authority, where the
Authority has agreed to a subordinated debt arrangement, or any Direct Agreement.
Funders should be able and encouraged to proactively support the scheme
in the event that the Concessionaire has difficulty meeting obligations under either
or both the Concession Agreement and the Funding Agreements. Provided
that any Direct Agreement imposes no greater liabilities on the Authority than
under the Concession Agreement, then it is in the interests of the host country to
allow the Funders to take control of the scheme and the Concessionaire to rescue
the scheme. How the Funders can effect the rescue depends upon the insolvency
law and practice of the host country and the Direct Agreement will reflect that.
The Concessionaire should be permitted to provide certain assets as security to
the Funders. The extent of the security that may be given will to a degree reflect
the concession rights granted.
In addition to the New Upgrades, the Concessionaire should ensure that the Below
Rail and other Infrastructure is renewed and maintained to a level that enables
sufficient capacity to handle the potential freight and other traffic on offer.
With this in mind, it is probable that potential demand should be reviewed periodically
and review results implemented.
As indicated earlier, a full list of assets is unlikely, much less, an asset condition
register. If the Concessionaire is delivering either or both New Upgrades and renewals,
it would be advantageous for an asset condition register to be prepared
and subsequently maintained. The extent of the register would depend upon a
cost/benefit analysis carried out during the study for reforms. Since the register
is likely to be maintained electronically, the Authority should be given ‘read-only’
access to the database.
At a minimum, the Concessionaire should negotiate in good faith with intent to
agree with the Authority on terms and conditions for Future Upgrades of any
lines, if existing Below Rail and other Infrastructure would constrain planned
increases in demand that arise from the review, in order to handle additional
freight traffic and technical standards. The Agreement should address setting
aside funds to finance Future Upgrades if this issue does not fall within the arrangements
between the Concessionaire and the Transport Competition Board.
Of necessity, contractual regulation under the Agreement must govern regulatory
matters and will require one or more schedules. If regulation exists under legislation,
the Transport Competition Board (referred to in the Introduction) will have
a significant role as regulator to allow an adjustment in tariffs and track access
charges if there is an issue as to whether Future Upgrades will be commercially
viable, as opposed to economically viable, the Authority may need to make available
capital grant or other funds to cover the whole or partial cost of Future Upgrades.
The World Bank Page 259